Vedanta details $5bn oil capex plan to revive output

Why Vedanta’s oil-and-gas reset matters now

Vedanta is sharpening its focus on oil and gas at a time when its legacy fields are showing natural decline and the group is preparing to split into separately listed businesses. The company’s oil arm, Cairn Oil & Gas, has outlined an aggressive plan to increase production using approaches inspired by the US shale model. The push comes against a backdrop of decade-long output decline at the vertical and a shrinking contribution to Vedanta’s consolidated revenue mix.

Chairman Anil Aggarwal said the newly demerged oil and gas unit is planning to independently fund a $1 billion capital expenditure programme for exploration. He told Moneycontrol on June 15 that the entity is positioned as debt-free and generates annual EBITDA of about $1 billion. The company intends to execute a three-year drilling plan across offshore and onshore assets, using internal accruals and new debt.

The $1 billion capex plan and how it will be funded

Aggarwal’s comments place funding strategy at the centre of the turnaround plan. The demerged oil and gas business is expected to rely on a mix of internal resource accumulation and incremental borrowings to finance the proposed exploration capex. This approach is significant because the standalone business will need to sustain investment levels without being supported by the broader group’s cash flows from metals.

Separately, Cairn officials have been in Houston discussing investments of up to $1 billion with oilfield contractors, according to the information in the provided material. The company has also indicated it plans to hire top American experts, including a reference to 10 US specialists being brought in to support the execution model.

FY26 snapshot: output down, revenue and EBITDA also fall

In FY26, Vedanta Oil and Gas Ltd reported a 16% decline in average daily gross operated production. Revenue fell 13% year-on-year to ₹9,582 crore. EBITDA declined 7% year-on-year to ₹4,664 crore, according to an investor presentation dated April 29.

The company’s operating context is also reflected in Barmer, Rajasthan, where natural declines have been observed in the oil fields. Against that decline profile, Vedanta has said it is looking to scale production over the next three years.

A decade-long decline is shaping the urgency ahead of demerger

The production challenge is not new. Over the past 10 years, output from Vedanta’s ageing oil fields has fallen from around 211 thousand barrels of oil equivalent per day (kboepd) in FY15 to nearly 103 kboepd in FY25. In the first nine months of FY26, output fell further to about 89 kboepd, below the company’s earlier guidance of 95-100 kboepd.

This slide has changed the vertical’s importance within Vedanta. A decade ago, oil and gas accounted for nearly 20% of Vedanta’s revenue, but the share is now around 6% in the material provided. In the first three quarters of FY26, the oil and gas business reported revenue of ₹6,999 crore, which was stated to be 6% of the company’s top line.

Cairn’s long-range target: 1 million barrels per day

Cairn Oil & Gas has said it wants to quadruple daily production to 1 million barrels per day over the next decade. The plan is framed as a domestic energy security move as well as a business objective, with an explicit focus on reducing India’s dependence on imported crude.

The strategy refers to adopting the US shale oil model to speed up drilling and production. The model, as described, relies on faster development cycles and execution intensity, which Cairn is aiming to replicate through expertise hires and contractor engagement.

Technology and project execution: what Vedanta has flagged

To counter declines, Vedanta has highlighted aggressive exploration, new technology and enhanced oil recovery. One specifically mentioned method is alkaline-surfactant-polymer (ASP) flooding at its key Rajasthan block. However, the material also notes that the ASP flooding process is months behind schedule. Vedanta had earlier indicated ASP flooding would start from July and add meaningfully to production by December.

The company is also looking to access tight oil, described as reserves deeply embedded in rocks, by drilling new wells. A company official, Sahurity, was cited saying these measures could take production closer to 90 kboepd in FY27, before gradually moving toward a long-term target of 150 kboepd.

Capex history and why it is being revisited

Vedanta’s oil and gas capex has been stated as $100-400 million a year over FY21-FY25, based on investor presentations referenced in the text. The share of overall group capex directed to oil and gas has fallen from over half to 15% over the same period. In FY25, Vedanta invested $100 million (over ₹2,700 crore) in oil and gas capex, including drilling 10 infill wells to increase production.

The increased spend being discussed now, including a $1 billion exploration programme, marks a shift in intensity compared with those recent annual levels.

What this means for India’s energy security narrative

The plan is being positioned against the reality that India imports over 80% of its crude oil, as noted in the material. Cairn has framed higher domestic production as a way to reduce import dependence and improve energy security. The context also includes references to rising West Asia tensions and supply risks, strengthening the argument for stable domestic output.

Aggarwal has linked the company’s push to a broader energy-security theme. At Vedanta’s 60th AGM, he said the company plans to double oil and gas production to 3 lakh barrels per day, while stepping up deepwater exploration and expanding operations in the Northeast. The strategy also includes the acquisition of seven new blocks under the Open Acreage Licensing Policy (OALP).

Key numbers at a glance

Market and investor lens: demerger pressure and execution risk

The material describes Vedanta as being under pressure to reverse declining output as it prepares to demerge the business into Vedanta Oil & Gas Ltd. The core investor issue is execution. Production is declining, key recovery projects are behind schedule, and the standalone entity will need significant capital investment.

A JP Morgan note dated January 30 was referenced as maintaining a neutral outlook on Vedanta stock and pricing production levels of only 95 kboepd until FY28. That contrast between internal targets and external modelling underscores the scrutiny on timelines, project delivery and the pace of drilling.

Conclusion

Vedanta’s oil and gas vertical is entering a critical phase as it seeks to fund a $1 billion exploration programme, adopt a US shale-style execution approach, and rebuild output after FY26 declines in production, revenue and EBITDA. The near-term focus is likely to remain on drilling pace, delayed ASP flooding rollout, and progress on tight oil efforts, alongside updates tied to the demerger timeline and funding mix.